Eli Lilly’s 2024 revenue grew 32% to $45bn, in line with recently downgraded guidance.
Growth accelerated to 45% in the final quarter driven by volume growth of its GLP-1 diabetes and obesity treatments Mounjaro and Zepbound.
Annual operating profit doubled to $12.9bn reflecting higher product margins and relatively modest growth in costs.
The quarterly dividend was raised by 15% to $1.30 per share. Towards the year-end the company also announced a $15bn share buyback.
Lilly still expects revenue growth of around 32% in 2025 with underlying earnings per share expected to rise nearly 90% at the mid-point of guidance, in-line with market forecasts.
The shares were flat in pre-market trading.
Our view
Eli Lilly didn’t grow as fast as initially expected last year, but 32% growth in revenue and a 2-fold increase in profits is hardly a snail’s pace. Expectations are for a similar outcome in 2025.
The global pharmaceutical company is one of the trailblazers helping to revolutionise treatments for hormone deficiencies such as diabetes. But sales of these treatments (namely a class of medicine known as GLP-1) have also been grabbing attention for their effectiveness as a weight management tool.
Obesity’s reached epidemic proportions in the modern era. In the UK alone, the economic cost of obesity could be close to £100bn. There’s growing evidence that these medicines can effectively reduce and treat the associated health risks.
The boom in demand led to pressure on the firm’s manufacturing facilities, but attention is now turning to how quickly demand will take to catch up with recent expansions in capacity. Launches in new markets and approvals for use in other disease areas are significant opportunities for Lilly’s lead GLP-1 compound. But both of these growth levers carry a high level of execution risk. There’s also a drive to bring the next generation of weight-loss wonder drug to the market. The company’s pace of development is impressive, but there’s plenty of competition to be wary of.
There are also concerns about the high price tag, particularly in the United States where anti-obesity jab Zepbound costs $1,059 per month. There have been steep discounts for those who aren’t covered by insurance, but most plans now accept Zepbound prescriptions. Employers are also increasingly footing the bill. But there remains intense political pressure for prices to fall.
Lilly certainly doesn’t have all its eggs in one basket, though, and expects a growing contribution from a handful of new medicines this year. The company’s relatively aggressive when it comes to its Research & Development budget, and that’s helped to create a robust pipeline.
While there are no guarantees of further research success, it does provide a route to mitigate the industry-wide pressure of patent expirations where manufacturers eventually lose exclusivity over medicines. However, this is not as big an issue as it has been for Lilly. Its dominant positioning in certain disease areas and expertise in manufacturing help provide a competitive edge.
Overall, we’re excited by the company's growth prospects. But Lilly’s industry leading growth rates have earnt its valuation a premium rating, which means there’s little scope for disappointment.
Environmental, social and governance (ESG) risk
The pharmaceuticals sector is relatively high-risk in terms of ESG. Product governance, particularly with safety and marketing, and affordable access to treatment are the key risk drivers. Labour relations, business ethics and bribery and corruption are also contributors to ESG risk.
According to Sustainalytics, Eli Lilly’s management of ESG risks is strong. Executive pay is linked to climate-related targets, but the exact mechanism is unclear. Similarly, there are no targets or deadlines set for improving employee diversity and engagement. Its initiatives related to value-based healthcare, as well as ensuring access to its medicine in developing countries, are considered adequate. Disclosure of clinical trial data is strong, but information about quality control in medical manufacturing could be clearer. The company is the subject of several lawsuits alleging anti-competitive practices in the pricing of insulin.
Eli Lilly key facts
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